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Building Customer Profiles To Increase Profit Potential

Direct marketing campaigns are truly effective when you
precisely target customers likely to buy from you.

This is done by Profiling
and Modeling prospects and clients.

Dumb mass mailings are replaced with “surgical” campaigns
that market to specific customers with accuracy using technology that is now
available.

Today, it’s possible to
collect an enormous amount of information about customers, but to use it
effectively you use it in “profiling” and “modeling”.

Both of these techniques are ways of applying external data
to possible clients.

They can be used to
prospect for business or to zero-in on existing customers for your
mailing.

The goal is to predict behavior
based on what you know about your customers.

These two methods are not mutually exclusive, and marketers
often use them together.

The difference
is that profiling data is overlaid against an existing client database, and has
a long life span.

It can be used for several mailings, and in contrast modeling
is used to sharpen the focus of a specific mailing.

In profiling start with the premise that you don’t want to
deal with a customer segment, but rather an individual customer.

Break up your client segment into clients who
share similar tastes and buying habits.

Then use demographic and behavioral information to create a useful
snapshot of the customer.

Begin to gather this information from your existing customer
database noting such things as frequency of purchases, buying habits, responses
to marketing offers, and repeat purchases.

Then start with your perceived
prospects using alternate sources of data from purchased sources.

Use all this data to break your customers
into clusters that share purchasing traits.

Obviously, profiling and modeling add to the cost of your
mailing project. You may wonder why you shouldn’t just stick to the old method
of “recency-frequency-monetary” (RFM) analysis.

The reason is that for RFM to
work effectively you need data on the client’s purchasing habits, and that’s
the rub!

It only works for your existing
customer and is of no use in finding potential clients.

What makes profiling/modeling cost effective is found in
three current trends.

Rising
mailing costs.

Computers
able to compute mountains of data rapidly.

Higher
quality customer data available.

In the past, direct marketers could mail out 400,000
mailings to find a strong market of 40,000 (1 customer out of 10 mailings was
average).

The dramatic increase in the
cost of paper and postage has made this practice prohibitively expensive.

Computers today are capable of doing millions of
computations per second.

This makes
analyzing mountains of data possible and not unthinkable anymore.

Higher quality customer data is more available today, and
there are more sources available for obtaining it than ever before.

The result is that you can afford to do a lot of
number-crunching before you spend a penny on postage.

You can also weed out the useless names and
mail only to your most likely prospects.

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